How to Pay International Contractors in Italy [2025]

Finding the right independent contractors in Italy can level up your global workforce and bring much-needed talent into your global company. But, independent contractor management can become complex if you’re unfamiliar with local labor laws and don’t have mastery over Italian tax codes.

Set yourself up for success before your first project starts by learning more about compliance with the Italian Civil Code, including correctly classifying freelancers, paying them, and turning them into full-time employees. Here's a step-by-step guide on how to run payroll for contractors in Italy.

Step #1: Classify your workers in Italy

Before hiring any contractors in Italy, it’s essential to clearly understand misclassification—accidental or intentional— as it can lead to high costs and penalties. 

Here are some of the potential costs:

• In Italy, employers who misclassify their workers can face administrative fines from EUR 100-500 for each misclassified worker.

• Tax authorities can impose severe penalties, including a 90% penalty for inaccurate tax returns and a 20% penalty for improper income tax withholding.

• Per the Italian criminal code, if an employer is found guilty of misclassifying a worker and avoiding social security contributions, they may be subject to fines of up to EUR 50,000 and up to three years in prison.

Employers who misclassify workers as independent contractors can be sued for compensation, including back wages, benefits, and emotional distress.

Here are some of the characteristics that differentiate Italian contractors from employees in the chart below:

Step #2: Determine the best way to pay your contractors in Italy 

To start paying contractors in Italy, decide on the payment method that works best for you. With the increase in remote work and global employment, employers now have access to more payment and provider options than ever before. Here are some of the options:

Bank transfers. You can open an Italian bank account, but you can only do so with a legal entity in the country. Once you have an account, you can deposit funds into Italian contractors' accounts. Or you can wire transfer from your U.S. bank account, but you may encounter delays.

International money orders. This traditional payment method can be slow and inconvenient. It requires the physical purchase and deposit of money orders, which may come with fees and unfavorable European exchange rates.

Checks. While it's becoming less common, some contractors may still accept checks as payment. However, processing times may be longer and there may be associated fees.

Digital payment platforms. Not all digital payment platforms are available in Italy. Some employers rely on platforms like Wise, Satispay, and PayPal to pay contractors but avoid Venmo as it doesn’t work in Europe. Remember that exchange rates are subject to change daily, making it difficult to forecast your billings. 

Global payroll services. Contractors are not included in the payroll and invoice the company directly for their services. Accounts payable handles this for many companies, but it's a lot to keep track of when hiring in a foreign country. With Rippling, you can pay Italian contractors alongside the rest of your global workforce.

Step #3: Use global payroll software to process payments for Italian contractors 

There are multiple ways to pay contractors in Italy, including Paypal, but paying through global payroll software is the fastest and simplest.

With Rippling, you can pay contractors worldwide, in one place, while complying with local laws. Here’s a preview of how Rippling’s global payroll system works:

Step #4: Ensure your Italian contractor has the right tax information 

Employers are exempt from payroll taxes for contractors. Independent contractors are responsible for filing their own taxes and social security contributions to the INPS. Specific tax rates and contributions will depend on the contracting model the worker operates under.

Contractors in Italy must file an annual tax return and pay income tax on their earnings by the end of November, along with municipal and regional tax. The contractor must make two advance estimate payments (in June and November) for the current tax year. 

To file taxes, contractors typically need the following:

• VAT registration number

• Tax identification number, or codice fiscale

• Modello Redditi PF form

Effortlessly manage contractors around the world

Managing contractors globally has never been easier. With Rippling, you can pay international contractors in Italy and around the world in one system.

Frequently asked questions about running payroll for contractors in Italy

Do you need to withhold taxes when paying contractors in Italy?

No, self-employed workers are responsible for arranging and paying their own taxes and social security contributions in Italy. 

Does Italy's minimum wage apply to independent contractors in Italy?

Surprisingly, Italy does not have a minimum wage. Contractors are able to set their own salaries. Keep in mind that other employment laws may not apply to Italian contractors.

Do Italian contractors get benefits?

No, independent contractors are not entitled to benefits. 

As of June 2017, however, self-employed workers have limited safeguards on the client's ability to change the contract unilaterally or end the working relationship due to needed maternity or sick leave.

Can you pay contractors in Italy in your home currency?

It's typically best to pay contractors in Italy in their local currency, the euro, to avoid fees and exchange rates. But if the Italian contractor agrees to it in writing, they can be paid in another currency.

Many international payment providers, like Rippling, support contractor payments in either euros or your own currency.

Can you manually pay contractors in Italy?

Small business owners often process contractor payments manually to cut costs. But, this process can become time-consuming as the business grows, especially when dealing with multiple contractors in Italy and other countries.

It's also important to note that manually processing payments comes with risks:

• Compliance. Manually running payroll runs the risk of human error and omissions. Choose Rippling for automatic compliance with local laws, no matter where contractors live.

• Security. Manual payroll processing using spreadsheets or paper records can pose security risks as sensitive contractor information may be lost, stolen, or misused—which comes with penalties in Italy under GDPR and local laws.

• Contractor experience. Manual payments can be slow, lacking transparency about payment timelines and exactly what contractors are being paid for. This creates a frustrating experience for contractors.

Make payroll automatic by using a system like Rippling. Rippling synchronizes HR data with payroll, ensuring compliant and efficient payment processing for contractors worldwide.

How do you turn a contractor into an employee in Italy?

Although hiring independent contractors for added flexibility and cost savings may be tempting, you can find yourself in legal trouble if they’re really misclassified employees.

Per Italian law, employees are individuals who have a full-time working relationship under the direction and supervision of their employer, as stated in Article 2094 of the Italian Civil Code. If you classify your independent contractor as a full-time employee, you must meet various legal requirements to avoid misclassification. These requirements include an employment contract, tax obligations, social security contributions, benefits, and more.

Plus, you'll need a legal entity in Italy—whether that's through establishing your own or using an EOR service.